The Power of Google and the $50M Fine Against JC Penney

A fascinating article today in the New York Times by David Segal takes a look at how JC Penney games the search system to boost its online sales.  It is a pretty good look inside the world of search (for mainstream media), but at the power Google wields over the world of e-commerce, well all commerce actually. From research done by DMG in the past for clients on both SEO and competitive research, it is not hard to see how wide-spread this activity is, but the scale of the JC Penney’s actions are breathtaking.  JC Penney stated in the NY times article it had fired its SEO firm, but the idea that the technology and online marketing people inside PC Penney did not know what was going on is ridiculous, despite the claim to the contrary.

What is particularly fascinating is Google’s pulling of “manual” levers to punish those who are caught gaming the system.   For as long as it takes to build reputation and positions online, to have that destroyed in a week is remarkable.  Even if organic search only accounts for 7% of JC Penney’s traffic as Penney’s claims, it still translates to big dollars.

According to the article the online business at JC Penney generated about $1.5b in 2009.  If you take JC Penney at its word and organic is only 7% of sales that is still over $100 million in annual sales just turned down, or maybe off.  So a conservative estimate could be that Google just handed JC Penney a $50M fine for online search engine optimization practices that it does not approve of!  Link building is not illegal, just frowned upon because it is unfair.  That is twice the size of the largest fine handed out by the FCC to Verizon last fall for its billing practices.

It is clear in the article that the NY Times discovered this information and turned it over to Google who took its corrective actions.  One lingering question is which one of JC Penney’s competitors dropped the story onto the lap of Mr. Segal at the NY Times…

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